TRANSCRIPT

JIM LEHRER: Wall Street hit a comeback milestone today. The Dow Jones industrial average closed above 10000 for the first time in a year. Stocks rose in part on upbeat earnings reports. The Dow gained more than 144 points, to finish near 10016. The Nasdaq rose 32 points, to close at 2172.

And oil topped $75 dollars a barrel for the first time this year. It’s been rising on hopes for a recovery and on weakness in the dollar.

Ray Suarez has more of our lead story coverage.

RAY SUAREZ: And, for that, we turn to Frank Ahrens. He covers the markets and the economy for The Washington Post. And he joins me from the Post newsroom.

Frank, you and I were talking earlier about what was behind the Dow’s return to 10000 from its trough earlier this year.

What can you tell us?

FRANK AHRENS: Right. The market bottom really began in March 9, and it’s been the financials, the big banks, the Goldman Sachs, the J.P. Morgan Chase, which reported third-quarter earnings today that really gave the Dow that last sort of bump up above 10000 it needed today.

RAY SUAREZ: So, this is really about the financial industry, and not a broader look at the American economy?

FRANK AHRENS: Yes, that’s certainly what has led it.

And think of it this way. The financials were down so far, I mean, we were on the edge of a financial abyss this time last year. And these financials, the stock, A, was so low, so they had a long way to come back up. But, B, they’re a big beneficiary of the government bailout, billions and billions of dollars.

So, in many ways, this has been a taxpayer-fueled rally, which is interesting, because a lot of individual investors have stayed on the sidelines, because they’re wary of it, for good reason.

RAY SUAREZ: The Dow is a closely watched index, but it’s only a snapshot of a small number of stocks. What about the other ones that look at the market more broadly? Are they way up as well?

FRANK AHRENS: Since the early March bottom, both the Dow — all three, the Dow Jones, which is the 30 blue chip stocks, the S&P 500, 500 very big companies, and the Nasdaq, which is very tech-heavy, they have all had a good rise.

The tech stocks have actually sort of been among the stronger companies that have led this surge. All three are up over 50 percent since March. Now, that’s starting to level off a bit. I mean, you had the big surge from March until about September. Then it’s starting to level off.

Now we have to look and see what third-quarter company earnings are going to show us, whether this can be a self-sustaining recovery or if it’s only really kind of a Red Bull, sort of caffeinated recovery.

RAY SUAREZ: Do these index rises tell us that investors have come to a different conclusion about the market’s near future than employers have, for instance?

Wall Street v. Main Street

We always know that unemployment, which is near 10 percent now and probably will crest somewhat higher than 10 percent -- and, also, don't think it's going to start diving right back down. It will probably stay high for a number of months -- we know that's what's called a lagging indicator, meaning the stock market comes back first.

Companies feel a little bit better about things, they start hiring people, unemployment goes down. That has been the same cycle we have seen for each of the past recessions and recoveries. What's different about this one, this is the one that has been -- had a massive infusion of federal money, taxpayer money, through the government.

And the key thing now is going to be managing the transition from sort of a government-stimulated economy to a self-sustaining economy. So, in many ways, this rally has been more of a traders rally than an investors rally. It's, traders are playing price differences.

RAY SUAREZ: So, this is often called a psychological milestone. Well, what's the psychological impact? Does it bring money into the market with a sort of reassurance that it's OK to be back there again?

FRANK AHRENS: Part of the psychological impact is, hey, if you can -- if you're one of the people who can peek at your 401(k) from time to time, it's got more money in it now than it had in it in March.

So if you thought of the Dow 14000 as being the height, in March, it was down to 6000, at 10000, we're about halfway back. So, if your stocks track the market, your retirement savings are about halfway back.

What it also does is, it helped move what Keynes called the animal spirits of the market. Markets move higher because they want to. Maybe it will bring some other investors into the market.

RAY SUAREZ: Now, at the same time as the market is -- the Dow index is hitting 10000 again, the dollar is way down. As you mentioned, unemployment is set to lag for some time.

And, just today, retail sales figures came out that showed a drop of 1.5 percent in September. So, the economy's still in pretty perilous shape, isn't it?

FRANK AHRENS: It's certainly wobbly. You need to go inside the numbers a little bit. What's interesting about the September retail sales is, if you take out autos from that, September retail sales actually bumped up a little bit. And that's exactly the government's stimulus economy I'm talking about.

September retails, no cash for clunkers. That was over. And, so, auto sales fell right back off the table. So, that's what we talk about moving from a government-fueled economy into more of a self-sustaining, organic economy.

RAY SUAREZ: And it's still a pretty long march back to investors feeling whole, isn't it, from where the market tumble began?

FRANK AHRENS: Absolutely.

I mean, if you have most of your -- say, your 401(k) in stocks, you're not going to feel whole again until the Dow hits 14000 again. And when that will be -- I was talking to one market strategist today, and I said, when are we going to see Dow 14000? And, on the other side of the phone, he just went phew.

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